RETAIL VIEW: Community effort needed to bring retailers to urban and rural areas

October 24, 2005

In Fresno, CA, community activists cajoled the city council into spending $11 million in redevelopment funds on a Food Maxx supermarket.

In Newark, NJ, it took six years of lobbying and two years of legal battles to turn 62 blighted parcels into a Pathmark supermarket.

In rural Chinle, AZ, a community development corporation on the Navajo Nation built a Basha's Market to serve the local Native Americans, and in so doing created more than 170 jobs for local residents.

In New York City's Harlem, it took two community organizations 10 years to bring a Pathmark to the community.

Each of these stories, and others are detailed in a new report titled "Healthy Food, Healthy Communities: Improving Access and Opportunities through Food Retailing," which was developed by PolicyLink, a California organization, and funded by a grant from the California Endowment. The report builds on an earlier report that linked obesity in children and adults with limited access to good quality, inexpensive food. The Produce News reported on similar research by The Rand Corp. in its Oct. 17 issue.

The idea that lack of access to good food for all Americans is creating a health crisis in the country is getting good traction in the nation's media as well as in the federal and state legislative halls. Just this past week (Oct. 10- 14), the Senate voted down an effort to drastically cut back on food stamps, using this argument as one of its rallying points.

But this report not only states the problem and gives background, it also lays out a game plan for communities to address and solve the problem.

The researchers hit on a number of different strategies to increase access to healthy food by underserved inner city and rural residents. It advocates and details successful efforts in bringing farmer's markets to communities in an effort to link farmers and consumers directly. It also discusses how to get local corner markets and convenience stores to increase their offerings and lower their prices.

But clearly the primary strategy is to entice a large supermarket chain to move into the community. Supermarket chains bring jobs, keep revenues in the community that would traditionally go elsewhere, and most important, provide a large variety of relatively inexpensive healthy food.

The exodus from the inner cities by supermarket chains accompanied the flight of the middle class over the past half century. The researchers have said that the modern-day supermarket model, in fact, was developed to serve the suburban community, and often times retailers cannot plug that model into an urban setting and make it work on paper. If it doesn't work on paper, it's not going to be built.

The researchers investigate on how different community activist and redevelopment groups have attacked the problems and solved them. They have said that there is a lot at stake, as the neighborhood supermarket can be the centerpiece of the revitalization of virtually any community and the residents in that community.

While the authors of the report would like to see supermarket executives proactively address the needs of poorer communities, they say that community activists and redevelopment corporations can help by lobbying state and local government for funds, partnering with retailers on ownership, and developing more accurate data that can reflect the buying power of these communities and show that the decision to build a new supermarket is economically sound.

For the purpose of the study, the researchers defined "supermarket" as a full-service grocery store that brings in more than $2 million in sales annually, though the average sales volume is typically much higher - more than $18 million. A supermarket typically creates between 100 and 200 permanent jobs, as well as temporary construction jobs. As such, it does create a boost for the local economy and should be in line for redevelopment dollars.

When working with a grocery store, the authors of the report suggested concerted help from the community in specific areas:

" Securing a site. When supermarket executives look to build a new outlet in what they perceive to be a marginal location, they need help. The typical 10-acre site probably has multiple owners, and receiving the permits for building could be a regulatory nightmare. As reported earlier in this story, it took eight years for a Newark, NJ, group to put together the needed land for their new supermarket. That's an eight-year project that most retailers would not tackle.

" Obtaining financing. Just as daunting as obtaining land is obtaining financing for an inner-city project in an area that may have high crime and low property values. Conventional financing avenues that a supermarket typically travels may not be the right mix. This is where combining grants, tax breaks and loans from multiple public and private sources -- including commercial banks, community development intermediaries, state and local economic development programs and federal agencies -- can do the trick. The Harlem Redevelopment Corp. put together a $15 million package that included loans from four private banks and a state economic development agency, as well as grants from federal and state sources, and an equity investment from a private equity fund.

" Working with the community. Locating a store in an inner city also requires supermarkets to often deal with a demographic breakdown that is not in line with that of the executives of the chain. Closing this cultural gap typically requires help. Community activists must work with the supermarket chain to develop realistic hiring practices. They also can develop an accurate model with regard to income, buying practices and buying power. The researchers point to numerous sources that currently exist but are not utilized. For example, the University of Wisconsin-Milwaukee Employment & Training Institute offers free profiles of purchasing power, business activity and workforce density for census tracts and zip codes within the 100 largest metropolitan areas in the United States. Another free resource is www.esribis.com, which provides profiles of any community based on zip codes.

" Transportation. One area of concern in inner cities is that shoppers tend to make more frequent trips to the supermarket and buy less per trip. This fact is an expensive proposition for retailers as it requires more staffing to handle the extra trips per week that the average customer takes. The researchers suggest that community programs be developed that can provide free or low-cost transportation to and from the stores. They also urge retailers to provide free return trips in exchange for a minimum purchase. This innovation can improve the profitability of the supermarket as well as the mobility of its customers. The researchers have said that such a program is working in Los Angeles. The Ralphs located in the West Adams neighborhood adjacent to the University of Southern California, for example, offers a free return trip to customers who spend $25. The report further states that a feasibility analysis of grocery shuttle services found that they can pay for themselves within two to 10 months.

" Employee training. Keeping and training good employees is a retail industrywide problem regardless of the location. The researchers suggested that community groups partner with the retailer to find, train and keep good employees. Again, this reduces a chain's cost of entering a new area and makes the venture more economically viable.

The researchers said that supermarkets can also help themselves be profitable by adapting stores to their environment in size, store offerings and by using local suppliers. For example the researchers found that when Schnucks opened the first supermarket in the predominantly African-American North St. Louis community in 50 years, it faced the challenge of meeting customer demand for certain products, such as a good sweet potato pie. After searching for a supplier, the store found a popular pie at Hooper's Better Bakery, a local store, and provided the bakery with capital and technical assistance to improve its production process. The improvements were so successful that the bakery now provides more than a dozen Schnucks supermarkets with a variety of pies.

The research paper has been designed as a model to help foster a relationship between retailers and the community to benefit both in the effort to bring good healthy food to all consumers.